Does size count?

Finding a deposit for your first home

I remember shopping for my first home. It was pretty daunting to say the least and for an experience that is supposed to be exciting and fun it does have its drawbacks. Not only do you have to find a house you like and figure out if you can afford it but if you’re lucky enough, you get to come across some pretty colourful estate agents some that don’t even stop eating their lunch and tell you the house is sold when you’re at the viewing (true story). When all is said and done it is definitely worth it when you finally get the keys. You may not get your dream home at first crack but it is a start that you can build on.

On top of all the things you need to worry about financing your purchase should be close to the top of the list. Regardless of how much you know about buying a home, it is generally understood that you need some sort of deposit. But how much? At the risk of stating the obvious, the bigger the better. In this case the size of the wave counts. You can avoid fees and the approval process generally becomes easier. However, this blog is not really designed to help those individuals equipped with large deposits, it’s more for those people who are scrounging for coins under their car seat.

Your focus should be on saving at least a minimum of 5% of the property value. If you live in Perth this works out to be about $25,000 relative to the median house price plus fees and charges. Fees and charges will differ depending on many variables, so we recommend asking us directly what you’ll be up for. It is also worth noting that contributing a deposit lower than 20% of the property value will mean you have to pay an insurance premium (Lenders Mortgage Insurance) which protects your bank if you can’t foot the bill. Some lenders will let you add this to the loan amount, making the payment more manageable. If you do find a 5% deposit remember that banks are also concerned with how you got it. “Genuine savings” is the term coined by banks that refers to providing evidence of your savings history. It helps them understand stability in your saving habits and is generally assessed over a 3 month period.

If you are one of those people who are struggling to save 5% then there are other options for you. Some banks will accept a rental history as savings evidence. You will need to prove rental payments through a registered agency and it doesn’t absolve you from contributing a 5% deposit but it opens up the option of receiving gifted funds or potentially getting a personal loan. It is worth noting that if you are using a personal loan to fund your deposit you will be assuming two new debts.

If all else fails using a guarantor might be your only option. Essentially your parents would use the equity in their house to provide a deposit for your home. This is of course assuming they have equity in their house and love you enough to risk there guaranteed amount if you can’t foot the bill.

There are also other options available that require an even smaller deposit but do have restrictions on annual income amounts and loan sizes. Contact us if you require more information on this.

If you are in the market for the first time hopefully what I have provided makes the process a little easier. If you have any questions please feel free to contact us at enquiries@beyondbroking.net.au. We can assess your situation individually and talk you through your options.